Last month, I had the pleasure of speaking with Annie Petsonk, who is International Counsel at the Environmental Defense Fund (EDF) and focuses on economic incentives in international climate policy. We discussed EDF’s role in helping to establish the Climate Action Network (CAN), the IPCC, and article 2 on the objectives of the UNFCCC. Looking forward, Annie and her colleagues have proposed creating a “club of carbon markets” if Parties fail to design the rules of an international carbon market in Article 6. Our conversation helped me understand the history of EDF’s involvement in the UNFCCC processes and their issues of priority going into COP26. 

EDF has worked on climate advocacy within the multilateral climate forum since the late 1980s, when it was still considered a subnational NGO and did not have a clear path to participate in the dialogues. To address the lack of civil society in negotiations, Michael Oppenheimer, former Chief Scientist at EDF, proposed the Climate Action Network, a structure for NGOs to build capacity and coordinate with other organizations. During the COPs, governments may have difficulty coordinating with each other but NGOs can facilitate discussions and connect important information. The CAN operated on a regional node structure and allowed EDF, along with other organizations, to strategize, share news, and coordinate efforts. 

Within the COPs, Petsonk further described EDF’s role as “bringing science, economics, policy, and law together to develop sensible economics and science that guides countries and communities in the search for and implementation of climate solutions.” 

EDF will continue its focus on mitigation efforts as they look forward to COP26, hoping to ensure that the rules for Article 6 are robust and of high integrity. Article 6 established a cooperative framework for two international market-based mechanisms. However, the parties failed to define a robust accounting protocol for emissions between countries, such as avoiding double-counting emissions reductions or carrying-over of pre-2020 surplus credits under the prior weakened Kyoto Protocol’s offset program (CDM). EDF demonstrated that it is possible to use smart market-based policies. An economic analysis they conducted showed that “carbon markets could achieve nearly double emissions reductions relative to current PA commitments, at no extra cost.” 

Petsonk called Article 6 their “crucial challenge” going into COP26. “How can we get the giant engine of economic growth around the world oriented to producing economic growth that protects the climate?” she asked, “not just for climate neutral growth but actually breaking the link between economic growth and emissions?”

If the Paris Agreement is unable to accomplish this feat through a global emissions trading program, Petsonk believes nations must break into smaller groupings called “clubs”. This “club of carbon markets” (CCM) connects fractured regional and national agreements to “support the development, harmonization, and increased ambition of domestic carbon markets.” [1] The CCM would first broaden participation to include subnational actors and among jurisdictions through voluntary association rather than a formal treaty. Members must agree to a framework of recognized carbon emission units; monitoring, reporting, and verification of their emissions; and rules that would govern the use of offset credits”. In return, the CCM offers jurisdictions technical support, lowering transaction and overall carbon abatement costs, reputational benefits, and may create an incentive that pressures participants into greater ambition for future commitments. 

Petsonk and her colleagues, Nathaniel Keohane and Alex Hanafi, have envisioned the CCM forming either within or outside of the Framework Convention. But whether Parties are able to decide on Article 6 or should move into a CCM model, rule designs for linking and accounting emissions reductions will determine the ultimate success of a market-based mechanism.